AT&T: 'We're all about wireless'

DALLAS

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Stephenson has long been a champion of wireless. In 2005, he was quick to lend his support to an idea, first raised by Cingular CEO Stan Sigman, to pursue a handset deal with Apple. (Cingular, which no longer exists, was a joint venture with BellSouth; both are now owned by AT&T.) Other telecoms, including Verizon, passed because Apple was demanding control of marketing, pricing and more. AT&T didn't blink, however, and the iPhone partnership was born.

The iPhone might seem like a no-brainer now, but back then it was little more than a concept, with no name, design plan or software operating system. And it was offered by a computer company that had zip experience in wireless.

But the idea did have one thing going for it: Apple CEO Steve Jobs. The Apple chief was convinced he could design a better smartphone, one that would make it easy — and fun — to use the mobile Web, which was just emerging. Stephenson says that's all he needed to hear.

"We're not betting on the handset," he says, reflecting on that fateful 2005 decision to lock arms with Apple. "We're betting on Jobs."

Golvin gives kudos to Stephenson for his deft handling of the Apple partnership. AT&T, he notes, is "renowned for the amount of control" it typically exercises over new products. With the iPhone, however, "AT&T essentially surrendered to Apple."

"To me, that was the standout of the whole iPhone deal," Golvin says. It also signaled a new way of doing business under Stephenson.

So far, the iPhone has been a good bet. Since its debut in June 2007, more than 6 million have been sold worldwide, putting it on track to sell 10 million units by the end of the year.

The 3G version hasn't disappointed. More than 1 million were sold the first weekend. And the burn continues. In the first 12 days, AT&T says 3G sales were double the level of the original, suggesting to some analysts that lightning has, indeed, struck twice.

"We believe that over the long term, the subsidized iPhone 3G will drive increased sales volume and revenues among high-quality, data-centric customers," telecom analyst Tom Seitz of Lehman Bros. recently wrote in a note to investors.

Simon Flannery, a senior telecom analyst at Morgan Stanley, agreed. "The $199 price point should be a big hit with consumers," he said.

U.S. sales figures aren't broken out separately. But AT&T in January said it had sold more than 2 million of the original devices. That makes the iPhone its most popular smartphone, by far.

Stephenson, a polite Oklahoman, isn't prone to self congratulations. But the iPhone's success is clearly a point of pride. "It's everything we hoped it would be," he says.

New demographic: Everyone

AT&T's share price is another matter. Owing to several factors, including the subsidy, some investors have lately been pounding the stock. The gloomy U.S. economic climate hasn't helped. AT&T shares closed Thursday at $30.81, down 10 cents. That's a far cry from its 52-week high of $42.97.

Stephenson allows that the haircut hurts, but he's also standing firm on his wireless strategy. "The $199 price point is where demand leaps," he says. "This is going to bring in a whole new demographic."